Financial Inclusion and Risk Management in Luxembourg: A Growing Concern Amidst Macroeconomic Uncertainty

In today’s macroeconomic context, traditional risks such as market, credit, and liquidity risks are resurging. However, these risks are now joined by novel risks that require risk managers to be vigilant, including technology-related, sustainability and ESG, geopolitical, and operational risks.

The Need for Proactive Risk Management

PwC Luxembourg has released a new report highlighting the importance of proactive risk management in the face of uncertainty. The report emphasizes that financial institutions and asset managers are facing an ever-more complex set of interrelated challenges that require robust principles-based risk management processes.

Key Findings from the Report

• Unpredictable events, or “black swans,” can have extreme impacts with severe negative repercussions.
• Financial institutions and asset managers need to update their risk profiles, examine and revamp their risk management processes, adopt a whole host of risk assessment methods, and integrate risk management into all operational facets.
• Technological developments require risk managers to familiarize themselves with how changes can impact both a portfolio’s value and the firm itself.
• ESG risks, such as extreme weather events, can lead to substantial drops in a portfolio’s value and reputational harm.

The Importance of Adapting Risk Management Strategies

The report concludes that it is time to adapt risk management strategies to fit the current era. By emerging as “Risk Pioneers,” financial institutions can strengthen their resilience and capture new value creation opportunities.

Recommendations for Financial Institutions

• Address ESG risks, which can lead to substantial drops in a portfolio’s value at the slightest extreme weather event, as well as reputational harm.
• Familiarize yourself with technological developments and how they can impact both a portfolio’s value and the firm itself.
• Update your risk profiles, examine and revamp your risk management processes, adopt a whole host of risk assessment methods, and integrate risk management into all operational facets.

Download the Full Report

To learn more about the importance of proactive risk management in today’s macroeconomic context, download the full report “From Compliance to Competitive Advantage: Risk and Performance in a Fractured World”.